Country Manager and Corporate Strategy

Country
Manager and Corporate Strategy

In the BMW case profiled at the beginning of this chapter,
the global company had decided as a matter of corporate strategy that it would
instate a Thai CEO for its Thai subsidiary as soon as an appropriate individual
had been groomed for that position. Another example of a global company that
subscribes to the perspective of employing country managers from the local
culture is P & G. Quelch (1998) has documented the career of Susana Elespuru at
P & G, where during the course of an 18-year period she became a country
manager.

Susana Elespuru was an ideal country manager from P & G's
point of view. She was Peruvian and had worked for P & G Peru for 16 years.
She understood the Peruvian environment well, and had managed P & G's
business efficiently. In addition, she had the necessary international exposure
and experience to fit into a global corporation. She had studied at a US
college, and during her course had also studied for a semester in France. While
with P & G Peru, she had been sent for a two-year assignment at the P &
G headquarters in the United States.

The challenges she faced at P & G Peru were characteristic of
that culture. One of the first challenges she faced was hyperinflation of up to
100 per cent per month. Prices of all commodities soared. P & G under
Elespuru responded by increasing the salaries of their employees by 100 per
cent. As a Peruvian, Elespuru was not thrown out of gear by the hyperinflation
that could reach almost 7000 per cent in the worst years. Meanwhile, her
managerial abilities enabled her to deal with the situation. And five years
after becoming country manager, she succeeded in doubling P & G's sales
volume.

Alternative
paradigm to that of country manager

An alternative to having country managers is using a
transnational model, such as that advanced by Bartlett and Ghoshal (1989). Instead
of country managers who direct entire business operations for a branch, this
model advocates centralizing strategic decision making at corporate
headquarters. It holds that in the wake of globalization, customer preferences
are becoming more similar, and hence companies need not engage in product
development separately and independently for every branch. Instead global
companies are advised to leverage their capabilities across borders, and
transplant best practices from one country to another. Additionally, the
transnational model recommends that:

Senior intercultural managers should think in terms of three
dimensions: product, geography and function.

Costs should be rationalized and control over all branches,
near and far, increased.

Well-entrenched country managers should be uprooted,
especially if they behave like king-emperors with considerable authority over
their branch.

Headquarters should try to encourage standardization to the
extent possible.

This model is an alternative to the country manager model, and is
therefore not inherently better or worse. IBM is an example of a transnational
corporation that has followed the transnational model to a large extent.

Quelch
and Bloom (1996) have advanced a few reasons why, in their view, the country
manager model is the superior one. The first is that for success in local
business, it is necessary to have good relations with local governments. Country
managers will build up an extensive network of useful government contacts over
the years they work for a particular global company. In Quelch's case study
about Susana Elespuru, the advantage of opting for a local country manager was
that she was Peruvian and understood how things worked within the Peruvian
culture. Further, local customers want personal attention in the form of product
adaptation to local cultures. Susana Elespuru succeeded in selling Pert Plus,
Pantene and Head & Shoulders, the three leading brands of shampoo marketed
by P & G, in the form of individual sachets. This was a reflection of the
reality in Peru at that time: people could afford sachets but not bottles of
shampoo.

Country managers are also well suited to taking on local
competition, which consists of other global companies as well as local
companies. While in Barcelona in 2001, the author of this book noticed that the
Spanish fast food company Pans was giving the US fast food multinational
McDonald's a run for its money. Local companies are often well placed to notice
and take advantage of local trends. Pans did this when they introduced Spanish
specialities like the long sandwich and other forms of tapas as part of their
fast food offering with success. Naturally Pans had the necessary market
knowledge and experience of Spanish culture to supplement standard fast food
fare with typical Spanish items. If a multinational is to compete successfully
against local heavyweights, country managers who have the required knowledge of
the market and local culture serve them best.

There are other reasons the country manager model has its
advocates. Global brands gain local appeal because of their brand image as
qualitatively superior products with a worldwide following. By the same token,
they lose ground when local brands are upgraded and are sold at lower prices.
Culturally sensitive country managers can take stock of the situation. They know
how to adapt global brands to local conditions, so that the best of both worlds
is made available to consumers. This is borne out in Quelch's case study of
Susana Elespuru. When Peru experienced a phase of relative economic stability
two years after Elespuru became country manager, Elespuru had this to say,
'Peru's 23 million consumers represent an
increasingly attractive target. We anticipate more multinational brands trying
to enter this market. But we intend to capitalize on the fact that P & G has
been here all along, through thick and thin, relentlessly building our brand
equities.'

A multicultural corporation likes to churn out innovations
and best practices. It likes to encourage new ideas to emanate from all their
branches, irrespective of whether those ideas can be replicated else-where.
Quelch and Bloom go so far as to opine that 'new product ideas and marketing
best practices - the competitive lifeblood of any multinational - are usually
generated in the field by people who observe and listen attentively to
customers, not by company-culture-bound executives at global HQ'. Quelch's case
study notes that while Susana Elespuru was country manager, P & G Peru's 400
employees were all local nationals. The expertise for responding to the market
was entirely nurtured from the local culture. When Elespuru wanted to penetrate
the market for Pepto-Bismol, she hired a Hispanic company to publicize the
product, with telling effect. According to Quelch and Bloom, country managers
succeed when they operate under conditions of organizational efficiency provided
by local stalwarts.

Country manager
model versus transnational model

The country manager model as a component of intercultural
corporate strategy has much to offer. So does the transnational model. Hence,
the issue is not of pitting the country model against the transnational model,
but of finding a suitable middle ground. The middle ground is extensive enough
to be enacted in a manner that suits an individual global company's
requirements. The part of the middle ground that is selected for one culture
need not be the part that is applied to another culture. The right balance
between globalization and localization has to be worked out for each branch,
depending on exigencies.

The country manager model suggests that good ideas and best
practices can originate in emerging economies and be replicated in advanced
economies. Quelch
and Bloom (1996) have cited the example of the construction materials
manufacturer Lafarge, which felt that cement plants could be built in the West
using the stripped-down lines approach they incorporated in Turkey. They also
quote the example of KFC, the food chain that operates primarily as a take-away
in the United States and Europe. In Malaysia, KFC adopted the local practice of
also operating as a restaurant. It is now considering introducing restaurants to
its chains in the United States and Europe. However, this advantage of the country manager model, like so many of its
other advantages, is not incompatible with the transnational model. The
transnational model in fact advocates the replicating of best practices. Most of
the companies profiled as chapter-opening case studies in this book employ a
judicious mix of the transnational model and the country manager model.

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